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Lecture 11

ECON 1B03 Lecture 11: Micro Unit 11
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Department
Economics
Course
ECON 1B03
Professor
Hannah Holmes
Semester
Winter

Description
Unit 11 Oligopoly and Profit Maximizing Behaviour Oligopoly: ⁃ Few sellers, usually big firms ⁃ Homogenous or nearly identical products ⁃ Interdependent firms: one firms decisions affects another firms profits ⁃ Ex: big oil companies Duopoly: oligopoly with only two members in the industry Collusion: an agreement among firms in a market about quantities to produce or prices to charge. This forms a: Cartel: a group of firms acting in unison Nash Equilibrium: a situation in which economic actors interacting with each other choose their best strategy based on the strategies that others in the market have chosen. ⁃ Always results in a suboptimal outcome Game Theory Game Theory: the study of how people behave in strategic situations The prisoner’s dilemma: a particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial. Dominant Strategy: is the
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